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TRAI’s tariff order reinforces digitisation deadline

03-May-2012
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TRAI’s tariff order reinforces digitisation deadline

If there was any doubt in context to the finality of the June 30, 2012 deadline for analogue cable systems in the four metros (Mumbai, Delhi, Kolkata and Chennai), Telecom Regulatory Authority of India’s (TRAI) April 30, 2012 order for the Digital Addressable Cable TV Systems (DAS) has cleared it.

Even though various television channels had already begun the communication around the deadline for analogue cable distribution platforms, the move from the Multi System Operators (MSOs) Local Cable Operators (LCOs) to ensure that enough set top boxes had reached concerned households was not active enough. One concern cited was what the MSO:LCO revenue sharing equation would be.

With its tariff order of April 30, TRAI has attempted to clear most of the doubts on the subject. Though there are some sections of the industry that believe that the June 30 deadline may still be delayed, TRAI’s move will drive more energy in attaining the deadline.

The order is seen to be very positive on the MSOs, who had so far seen only 15 per cent of the average revenue per user (ARPU). The TRAI order increases this to 55-60 per cent even though it has allowed the clause to be individual between MSO and LCOs in their negotiation. The stated ratio comes in play only in cases where there is failure to reach a mutual agreement on the negotiation.

The order may lead to some fundamental changes amongst MSOs and LCOs. As TRAI has stated a requirement of 500 channels, which is in addition to the capital required for digitisation, there is a likelihood of smaller MSOs to come together in order to meet this requirement. In the changed revenue share order, there would be some LCOs as well that will find it difficult to continue ops. These too will look to combine forces in order to survive.

Some industry observers on the other hand question why MSOs are empowered to decide final pricing. Unlike any other industry, where it is the manufacturer that decides the price, the situation here implies that it is the retailer that would be deciding the price. TRAI’s order indicates that it sees the MSOs’ role critical in driving digitisation and eventually ensuring a competitive and transparent last mile in the distribution system.

While there still are areas that need clarity as far as broadcasters are concerned, on the whole, the TRAI order has set the stage to achieve distribution digitisation.

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